Foreclosure hotline offers HOPE

First program in U.S. to aid about 40,000 homeowners in state

John Rebchook, Rocky Mountain News

Published October 12, 2006 at midnight

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Colorado on Wednesday launched the nation's first statewide foreclosure hotline, which came out on the same day a national study said the state continues to be plagued by the highest foreclosure rate in the country.

The hotline, 1-877-601-HOPE, is expected to help at least an estimated 40,000 homeowners in some stage of foreclosure in Colorado, said Zach Urban, program manager for Denver-based Brothers Redevelopment, which has been hired by the Division of Housing to administer the program.

The program is expected to cost between $300,000 and $500,000 in the first two years, said Kathi Williams, division director of the state's Division of Housing, which put together the public-private consortium to deal with the escalating problem. Foreclosures cost homeowners, lenders and municipalities hundreds of millions of dollars annually.

The Division of Housing contributed $250,000 to kick off the hotline. Also, the attorney general's office is going to contribute money it receives from lender Ameriquest as part of a $295 million national settlement involving predatory lending practices. The Colorado Association of Realtors is contributing $30,000, and JPMorgan Chase is kicking in $12,500, Williams said.

The $500,000 cost may seem like a large amount but could stem the tide on a problem whose impact goes beyond the 14,205 foreclosures reported through September, a 32.3 percent increase from 2005, according to the Division of Housing.

"We're trying to stop the bleeding," Williams said.

She said a lack of price appreciation in homes, risky creative financing such as adjustable rate mortgages and interest-only loans, slower economic growth during the past few years, predatory lending practices, and scams are contributing to rising foreclosures.

The hotline will provide about 60 counselors from about 30 different agencies across the country. Some of the counselors are part of the Colorado Housing Counseling Coalition, which is composed of counseling agencies throughout the state including cities such as Aurora, while others are nonprofits, said Zach Urban, program manager for Brothers Redevelopment, which is managing the program.

Urban said the cost of foreclosure is costing taxpayers.

"We had the University of Colorado-Denver last year study the cost for us, and they found on average it costs a municipality $10,000 per home," he said.

Williams said that in Pueblo, for example, vacant foreclosed homes were being used for meth labs.

Mike Rosser, a retired mortgage banking executive, said that foreclosures often cost lenders $35,000 to $50,000 on each home.

"They also drive down property value, which means less is collected in property taxes," he said.

Meanwhile, a report by Irvine, Calif.-based RealtyTrac said that for the second consecutive month, Greeley has the highest foreclosure rate among the 252 metropolitan areas it surveyed.

Program highlights

• Number: 1-877-601-HOPE (4673)

• Cost: $300,0000 to $500,000 over the next two years

• What it does: Help tens of thousands of Colorado homeowners who are delinquent on their mortgages or may miss a mortgage payment

• When you should call: First signs of trouble

• What they can do: Counselors can act as intermediaries between you and lenders, give you a game plan, help you organize your finances, avoid scams, reduce your potential liability, and possibly sell or keep your home.

• Why you should care: Foreclosures lower values of surrounding homes. Every foreclosure on average costs a municipality an estimated $10,000 per home for additional costs, such as police protection. They also are magnets for crimes, such as meth labs, and ultimately will lower property taxes, hurting schools.

Sources: Division of Housing and Brothers Redevelopment

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